*
Monthly sales volume +0.5% in January vs Rtrs poll -0.3%
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December sales fall revised down to -1.2%
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ONS says trend remains negative for retailers
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Consumers turning to discount stores as inflation bites
(Adds economists' comments, background on discounters, finance
minister)
By William Schomberg and William James
LONDON, Feb 17 (Reuters) - British consumers
unexpectedly increased their shopping in January, but the big
picture remains one of weak demand from inflation-hit households
relying more on discounts at retailers to make ends meet.
Official data published on Friday showed sales volumes rose
by 0.5% from December for only the second month-on-month
increase since August 2021. A Reuters poll of economists had
pointed to a 0.3% fall in sales last month.
Fuel sales rose in January, reflecting a fall in prices, and
discounting helped online retailers as well as jewellers,
cosmetic stores and carpet and furnishing shops, the Office for
National Statistics said.
But clothing store sales fell back sharply after rising for
four months, and food store sales dropped again as consumers
hunted for cheaper products and bought fewer items.
Sales volumes in the key Christmas month of December fell
more deeply than previously reported, dropping by 1.2% from
November, rather than the original estimate of a 1.0% decline.
"After December's steep fall, retail sales picked up
slightly in January, although the general trend remains one of
decline," ONS Director of Economic Statistics Darren Morgan said
in a statement.
Sales fell by 5.1% compared with January 2022 for their 10th
consecutive year-on-year drop, the longest such run since the
2008-09 global financial crisis.
Volumes were 1.4% below their levels immediately before the
coronavirus pandemic struck.
Britain's economy is widely expected to fall into a
recession this year under the weight of the leap in inflation
and polling firm GfK's consumer confidence index last month
showed households close to their gloomiest since at least 1974.
Sterling fell slightly against the dollar and the euro
immediately after the data was published.
The Bank of England has said the surge in inflation seems to
be turning a corner and data published on Wednesday showed the
consumer prices index fell by more than expected, although at
10.1% it is more than five times the BoE's target.
It is also much higher than growth in wages, eating into the
spending power of consumers.
Energy bills for households could fall by the summer which,
while still sky-high compared with their levels before Russia's
invasion of Ukraine, could alleviate the drag on demand.
But James Smith, an economist with ING, said the prospect of house price falls and higher mortgage costs risked adding to the gloom among consumers. "Overall, we're expecting a very mild recession through the first half of this year," he said. Finance minister Jeremy Hunt has ruled out another major round of support for households when he delivers an annual budget statement on March 15, and there is also likely to be more pain for borrowers from the BoE soon. The central bank is expected by most analysts and investors to raise interest rates again, this time by a quarter of a percentage point in March. It might do the same again in May, which would take Bank Rate to 4.5%, the highest since 2008. With consumers feeling the pinch, retailers are battling to win over price-conscious shoppers. Recent industry data has shown particularly strong performances from German-owned discounters Aldi and Lidl as shoppers seek to offset grocery inflation, which hit a record 16.7% in the four weeks to Jan. 22. The British arm of Aldi said this week it would hire more than 6,000 workers. <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ A mixed bag ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^> (Writing by William Schomberg; Graphic by Sumanta Sen; Editing by William James and Alex Richardson)
Reuters Messaging: william.schomberg.reuters.com@reuters.net))